RNS Number:7683B
Tissue Science Laboratories PLC
27 September 2002
The following amends the Interim Results announcement released today 27
September 2002 at 07:00 under RNS number 7359B. These results cover the six
month period to 30 June 2002 and not 2001 as previously stated in the heading.
Interim Results for the year ended 30 June 2002
Aldershot, UK - 27 September 2002 - Tissue Science Laboratories plc (LSE: TSL),
the medical devices company specialising in human tissue replacement and repair
products derived from porcine dermis, today announces its interim results for
the six month period ended 30 June 2002.
Financial highlights
- Sales increased by 107% to #1.4 million (H1 2001: #0.7 million), due to good
growth of PermacolTM Surgical Implant in core markets of urology/gynaecology and
general surgery
- Investment continued in R&D, manufacturing and sales and marketing
infrastructure to support anticipated sales growth
- Loss after tax for the period of #1.5 million (H1 2001: #1.0 million) in line
with expectations
- Solid cash position at 30 June, with net funds of #6.0 million (31 December
2001: #8.4 million) expected to be sufficient for the Company to reach
profitability
Operational highlights
- Continued good progress made in urology/gynaecology market in the US and
Europe
- Launch of PermacolTM Surgical Implant in the US via commission-only sales
force for complex and recurrent hernia applications. Good initial response from
the market
- FDA approval for PermacolTM Surgical Implant for Head and Neck applications.
Planned launch via commission-only sales force in early 2003
- Post period end, commercial launch of TSL's first injectable product,
PermacolTM Injection, in Europe, as a urethral bulking agent (UBA) for the
treatment of female stress incontinence
- Manufacturing facility completed on time and on budget; production expected
to commence by the end of 2002
Commenting on the results, Martin Hunt, CEO of TSL, said:
"A core element of our strategy is to drive the business to profitability and
cash generation with the cash resources currently at our disposal and we are
confident that this can be achieved without returning to the market. We are
seeing continuing strong growth during 2002 and are targeting reaching
profitability in the second half of 2003 and expect to be cash generative by the
end of that year. Delays in signing a partner for Head and Neck applications
will impact revenues for 2003 as will the lower than previously anticipated rate
of growth in US urology sales. However, we expect sales of existing products to
continue to grow strongly and feel that growth rates of this level represent a
good overall performance in the current environment."
-Ends-
Enquiries:
TSL plc Tel: 01252 333 002
Martin Hunt, Chief Executive
Financial Dynamics Tel: 020 7831 3113
Melanie Toyne-Sewell / Samantha Robbins
CHIEF EXECUTIVE'S STATEMENT
INTRODUCTION
The focus for the business in the first six months of 2002 has been to continue
to grow sales and gross margins as we drive the business towards profitability
and cash generation. We have grown our market share substantially in the urology
/gynaecology sector through our partner, CR Bard in this period. We have also
launched a new application for our PermacolTM Surgical Implant sheet in
recurrent hernia and launched our first injectable product in Europe, PermacolTM
Injection, as a urethral bulking agent (UBA) for the treatment of female stress
incontinence.
FINANCIAL PERFORMANCE
Overall, product sales in the first half were up 107% to #1.4 million (H1 2001:
#0.7 million). Total turnover, which includes milestone receipts, increased by
87% on the first half 2001. Losses after tax in the first half of the year were
#1.5m (H1 2001: #1.0 million).
We have seen an improvement in gross margins from 18% in the comparative period
to 39% as a result of taking manufacturing in-house from our previous
sub-contact arrangements and as increased sales volumes improve the recovery of
our fixed production costs. We expect this trend to continue in the second half.
Within operating expenses, the main cost has arisen from investment in the
business infrastructure - recruiting key individuals to our product development,
manufacturing, and quality assurance teams. Marketing expenses have also
increased due to the opening of a US branch office to support the growth
potential in this geographical market. Another significant cost increase has
been in product liability insurance premiums as our turnover and penetration of
the US market increases. R&D expenditure was #0.8 million (H1 2001: #0.5
million) as clinical trials continue to support our submission for approval of
PermacolTM Injection in the US for the treatment of female stress incontinence.
With respect to capital investment, the build and equipping of our new
manufacturing facility was completed on time and on budget. A lease finance
facility of #0.4 million has been secured to cover the remaining capital
investment in plant and equipment which is planned in the second half of the
year.
At the period end, we retained a solid net funds position of #6.0 million (31
December 2001: #8.4 million) which is expected to be sufficient for the Company
to reach profitability.
OPERATIONAL PERFORMANCE
SALES
Urology & gynaecology - sheet product
Our partner CR Bard Inc ('Bard') has continued to invest in sales and marketing
activity to drive sales of PelvicolTM, growing TSL sales revenue by 112% to
#1.2 million (H1 2001: #0.6 million). Bard has made solid progress in selling
the product into new territories in both the US and Europe, as evidenced by
sales into the French market for the first time as a result of achieving
reimbursement for PelvicolTM. In the US, surgeons have responded well to the
product since its launch last year.
Actual sales in the US have been lower than expected when compared to early
post-launch estimates, however, European sales have significantly outstripped
original forecasts. Overall sales in this area are below our initial
expectations, and therefore, we have adjusted our future expectations to take
account of these factors. This said, in terms of in-market unit sales, Bard is
confident of achieving full year growth of circa 100% for 2002 versus 2001 for
both Europe and the US.
We will continue to work closely with Bard to develop this market sector. To
achieve this aim, Bard has committed to increase substantially the sales and
marketing resource allocated to the promotion of Pelvicol to US surgeons in
2003.
Hernia - sheet product
In June, we launched PermacolTM Surgical Implant as a new application - for the
complex and recurrent hernia markets and deployed our first seven
commission-only sales representatives in the US. We have made excellent
progress to date and feedback is encouraging with usage of our sheet product in
these procedures being well received by surgeons. The conversion rate of sales
calls to product sold has been high. Going forward, our objective in the US is
for coverage of the major metropolitan areas by the end of this year and
national coverage by mid 2003. This activity is supported by our office in
Atlanta, US, which was opened in February.
In the UK, we have started selling PermacolTM Surgical Implant for the hernia
market through our own in-house sales force. In the rest of Europe, new
revenues should be forthcoming in 2003 as we build-up our European distribution
partnership network.
Overall, we expect sales from the US and UK to contribute to revenues in the
second half of the year and we look forward to reporting on progress.
To support our efforts in targeting the hernia sector, a study into the use of
PermacolTM Surgical Implant for the treatment of hernias was presented at the
Association of Surgeons of Great Britain and Ireland Annual Scientific meeting
in Dublin in May. The initial results were positive and indicated that Permacol
TM Surgical Implant was an effective method of providing tissue repair for this
area and offered benefits over synthetic mesh including fewer post-operative
blood clots within the tissues and patients recovering physical activity more
quickly.
Head & Neck - sheet product
Besides targeting the hernia market in the UK, the in-house sales team is
selling the sheet product into the head and neck market. With UK national
coverage now in place, we are well positioned to build sales in the second half.
We continue to seek a marketing partner for these applications in the US and
Continental Europe. We will also expand our US commission-only sales force in
early 2003 to begin to establish a market position and generate revenues whilst
simultaneously demonstrating the potential for the technology and enhancing its
attractiveness to potential marketing partners.
NEAR TERM SALES OPPORTUNITIES
Urology & gynaecology - injectable product
In August 2002, an important milestone was achieved with the European launch of
PermacolTM Injection (UBA), to treat female stress incontinence. This product
will be marketed initially in the UK by our own sales force and we will be
seeking distributors for the main European markets. We expect this product to
start contributing to sales revenues in the UK towards the end of the second
half of 2002. In terms of access to the US market, we have completed the
recruitment of patients into our clinical study which will support an
application for marketing approval in the US for 2004.
Orthopaedic - sheet product
A recently published paper on the use of PermacolTM Surgical Implant indicates
that the product is a safe and effective alternative in the surgical management
of chronic massive rotator cuff defects in the shoulder joint. As a result, we
are currently evaluating this area as a new indication for the product in both
Europe and the US.
RESEARCH & DEVELOPMENT
PermacolTM Injection (UBA)
We continue with our clinical study for Permacol Injection (UBA) which will form
part of our submission for US registration. We completed patient recruitment
for the clinical study in August and we expect to be able to report on progress
of this study by the end of 2003.
PermacolTM Injection (Cosmetic Reconstruction)
This area remains a core element of our strategy for future sales growth. We
anticipate commencing pilot clinical studies next year to support European
registration and will be seeking a development partner for the major clinical
studies required for US market access.
PermacolTM Wound Therapy
Good progress is being made to develop new formulations of PermacolTM for
application in woundcare.
INTELLECTUAL PROPERTY
A significant milestone was reached recently with the granting of the European
patent for PermacolTM Injection. We continue to seek further patents in major
markets, in particular, the US.
MANUFACTURING
In March, we reported that circa #1.5m of the funds raised at IPO had been
allocated for investment in our own manufacturing facilities at Swillington in
Yorkshire. We are pleased to report that the build and equipping phases of this
project have been completed on budget and that the validation phase has
commenced. Subject to the successful completion of validation, we anticipate
this unit to be in production by the end of 2002. This is another significant
development for the Company and the output of this unit will support the
significant sales growth we expect in 2003.
OUTLOOK
A core element of our strategy is to drive the business to profitability and
cash generation with the cash resources currently at our disposal. We remain
confident that this can be achieved without the requirement for further external
funding.
For the full year 2002, we are targeting a similar growth profile to that
achieved in the first half. This growth is expected to come from continuing
sales of the sheet product in the urology / gynaecology fields and from the new
revenues resulting from the launch into the complex and recurrent hernia
sectors. We also expect the launch of the UBA injectable product in Europe to
begin contributing revenues in the fourth quarter of the year.
Sales are targeted to grow at a similar rate in 2003 as in 2002. The delays in
signing a partner for Head and Neck applications and lower than originally
anticipated US urology sales growth will impact future revenue. This, however,
will be partially offset by our intended entry into the Head & Neck/ENT markets
via our commission-only sales force in early 2003. On this basis, we have
targeted a move into profitability in the second half of 2003 and expect to be
cash generative by the end of that year. We believe that growth rates at this
level represent a good overall performance in the current environment and we
continue to strengthen the business.
Martin Hunt
Chief Executive Officer
27 September 2002
Consolidated Profit & Loss Account for the Six Months Ended 30 June 2002
Six months Six months Year
ended ended ended
30 June 30 June 31 Dec
Note 2002 2001 2001
(Unaudited) (Audited) (Audited)
#000s #000s #000s
TURNOVER 2 1,380 738 1,706
Cost of Sales (842) (604) (1,512)
Gross Profit 538 134 194
Selling and distribution costs (239) (121) (302)
Administrative Expenses
Research and development costs (828) (458) (1,293)
Other administrative expenses (1,094) (531) (1,522)
Exceptional administrative expenses 3 - - (184)
(1,922) (989) (2,999)
Operating Loss (1,623) (976) (3,107)
Interest Receivable 123 2 28
Interest payable and similar charges
Bank and finance lease interest (8) (4) (54)
Exceptional finance costs 3 - - (239)
RETAINED LOSS ON ORDINARY ACTIVITIES BEFORE AND
AFTER TAXATION (1,508) (978) (3,372)
Basic loss per ordinary share 4 6.8p 8.5p 25.6p
All amounts relate to continuing operations.
There were no recognised gains and losses for the current or preceding period
other than those included in the profit and loss account.
There is no difference between the retained loss on ordinary activities before
and after taxation for the period stated above and their historical cost
equivalents.
No dividend has been paid or is payable in either the current or prior periods.
Consolidated Balance Sheet as at 30 June 2002
30 June 30 June 31 December
2002 2001 2001
(Unaudited) (Audited) (Audited)
#000s #000s #000s
FIXED ASSETS
Tangible assets 1,702 481 857
Current Assets
Stocks 207 162 172
Debtors 785 362 875
Cash at bank and in hand 6,289 479 8,711
7,281 1,003 9,758
Creditors: amounts falling due within one year (1,796) (879) (1,925)
NET CURRENT ASSETS 5,485 124 7,833
TOTAL ASSETS LESS CURRENT LIABILITIES 7,187 605 8,690
Creditors: amounts falling due after
more than one year (152) (207) (176)
NET ASSETS 7,035 398 8,514
CAPITAL AND RESERVES
Called up share capital 2,212 1,060 2,212
Share premium account 12,477 2,157 12,477
Shares to be issued 75 183 46
Share premium on shares to be issued - 824 -
Merger reserve 545 545 545
Profit and loss account (8,274) (4,371) (6,766)
EQUITY SHAREHOLDERS' FUNDS 7,035 398 8,514
Cashflow statement as at 30 June 2002
Six months Six months Year
ended ended Ended
Note 30 June 2002 30 June 2001 31 Dec 2001
(Unaudited) (Audited) (Audited)
#000s #000s #000s
Net cash outflow from operating activities 5 (1,561) (901) (2,274)
Returns on investment and servicing of Finance 127 (3) (265)
Capital expenditure and financial investment (956) (35) (626)
Cash outflow before use of liquid resources and
financing (2,390) (939) (3,165)
Financing
Net cash (outflow)/inflow from financing (71) 1,248 11,720
(Decrease)/increase in cash in the period (2,461) 309 8,555
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN
NET FUNDS
(Decrease)/increase in cash in the period (2,461) 309 8,555
Cash outflow/(inflow) from movement in debt and
lease financing 71 (241) (249)
Change in net funds resulting from cash flows (2,390) 68 8,306
New finance leases (11) - -
Currency translation difference (11) 10 (5)
Movement in net funds in the period (2,412) 78 8,301
Net funds brought forward 8,435 134 134
Net funds carried forward 6,023 212 8,435
Notes
1. ACCOUNTING POLICIES AND BASIS OF PREPARATION
The financial information set out in this announcement does not constitute the
Company's statutory accounts for the six months ended 30 June 2002. Information
for the year ended 31 December 2001 has been derived from the statutory accounts
for that period which have been delivered to the Registrar of Companies. The
audit report for the year ended 31 December 2001 was unqualified.
The accounting policies adopted are consistent with those adopted in the
previous period.
2. TURNOVER
A geographical analysis of turnover by destination is as follows:
Six months Six months Year
ended ended ended
30 June 30 June 31 Dec
2002 2001 2001
(Unaudited) (Audited) (Audited)
#000s #000s #000s
United Kingdom 146 88 183
Europe 493 117 221
USA 741 533 1,302
1,380 738 1,706
An analysis of turnover by class of business is as follows:
Product sales 1,380 668 1,636
Milestone income - 70 70
1,380 738 1,706
3. EXCEPTIONAL ITEMS
Six months Six months Year
ended ended ended
30 June 30 June 31 Dec
2002 2001 2001
(Unaudited) (Audited) (Audited)
#000s #000s #000s
Administrative expenses
Patent cost written off - - 130
Flotation costs not chargeable to share premium
account - - 54
- - 184
Interest payable and similar charges
Costs associated with obtaining bridging loan
finance - - 239
4. LOSS PER SHARE
Six months Six months Year
ended ended ended
Loss per ordinary share has been 30 June 30 June 31 Dec
calculated based on the weighted-average 2002 2001 2001
number of ordinary shares in issue during (Unaudited) (Audited) (Audited)
the period. #000s #000s #000s
Loss for the period (1,508) (978) (3,372)
Basic loss attributable to ordinary shareholders (1,508) (978) (3,372)
Weighted average number of ordinary shares 22,119,338 11,464,543 13,161,477
Loss per share 6.8p 8.5p 25.6p
5. RECONCILIATION OF OPERATING LOSS TO NET CASH OUTFLOW FROM OPERATING
ACTIVITIES
Six months Six months Year
ended ended ended
30 June 30 June 31 Dec
2002 2001 2001
(Unaudited) (Audited) (Audited)
#000s #000s #000s
Operating loss (1,623) (976) (3,107)
Depreciation of tangible fixed assets 123 84 297
Decrease/(increase) in debtors 77 (204) (716)
Increase in stocks (35) (104) (115)
(Decrease)/increase in creditors (144) 309 1316
Foreign exchange loss/(gain) 11 (10) 5
Shares to be issued 30 0 46
(1,561) (901) (2,274)
This information is provided by RNS
The company news service from the London Stock Exchange
END
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